Stock index futures slipped on Wednesday as investors paused to gauge if the recent market run-up will be sustained, while a drop in commodity prices looked set to weigh on shares of natural resource companies.

An overnight sell-off in Chinese stocks was likely to fuel some unease due to concerns that banks may begin to restrict lending there to take some of the froth off the market.

Microsoft Corp and Yahoo Inc will be in focus. According to a source familiar with the situation, the two companies have agreed to an online search and advertising partnership.

Key economic reports due on Wednesday include data on June durable goods at 8:30 a.m. (1230 GMT), and the Federal Reserve's Beige Book at 2 p.m. (1800 GMT) -- which is the central bank's snapshot of regional economic conditions.

Companies posting quarterly results before the bell included Time Warner Inc , which reported a lower second-quarter profit, hurt by falling revenues at its magazine publishing, AOL and movies units.

U.S. front-month crude dropped 2.2 percent or $1.50 to $65.74 a barrel in electronic trading.

S&P 500 futures shed 3.40 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dipped 25 points, and Nasdaq 100 futures were off 1.75 points.

S&P 500 stock index futures had dropped more than 1 percent earlier, driven lower by a 5 percent slide in Chinese shares <.SSEC> -- their biggest daily decline in eight months -- on worries that authorities might take measures to cool the 80 percent bull run in Shanghai this year.

In Tuesday's trading, the Dow and the S&P 500 dipped on Tuesday, recovering from earlier declines, as investors shrugged off weak consumer confidence data and focused on positive earnings reports. But a rise biotechnology shares helped the Nasdaq eke out a gain.

(Reporting by Ellis Mnyandu; Editing by Theodore d'Afflisio)

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